What about my bonus?
I’ve seen a lot of listserve traffic about what kind of bonus or incentive program to give employees. Some of these organizations are nonprofit with fewer than thirty employees, and they typically don’t have too much money at the end of the year to distribute. But they do have some, so they look for ways to ensure that each individual gets the “right” bonus. This ultimately involves ranking people, and giving those at the “top” of the performance curve more money (it’s only fair, right?).
Although arguably fair, it may have some unintended negative side effects. Marshall Van Alstyne points out in this month’s Harvard Business Review that rewarding individual performance can have a seriously negative impact on sharing information within the organization. He presents a great diagram showing simply the email traffic between and among two offices in the same organization. The office that rewards everyone for organizational performance is a rich web of lines, many of them thick (representing higher email traffic), while the other (that rewards individual performance) is sparse, with each person connecting to only two or three others. Here’s the kicker: each additional connection reflected an average of $6,000 in additional revenues generated.
It’s just one example, but rewarding people for organizational performance yielded more knowledge shared and better financial results. Are you willing to be “unfair” (certainly some carried more weight than others) in order to increase overall performance?